BILL NUMBER: AB 1098	CHAPTERED  09/07/00

	CHAPTER   322
	FILED WITH SECRETARY OF STATE   SEPTEMBER 7, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 5, 2000
	PASSED THE SENATE   AUGUST 31, 2000
	PASSED THE ASSEMBLY   AUGUST 31, 2000
	AMENDED IN SENATE   AUGUST 25, 2000
	AMENDED IN SENATE   AUGUST 22, 2000
	AMENDED IN SENATE   AUGUST 10, 2000
	AMENDED IN SENATE   JULY 6, 2000
	AMENDED IN SENATE   JULY 3, 2000
	AMENDED IN SENATE   MAY 18, 2000
	AMENDED IN ASSEMBLY   JANUARY 3, 2000

INTRODUCED BY   Assembly Member Romero
   (Coauthors:  Assembly Members Aroner, Firebaugh, Honda, and
Keeley)

                        FEBRUARY 25, 1999

   An act to amend Sections 1241, 1265, 1287, 1301, and 1324 of, and
to add Sections 1269.5, 1281.1, 1282.2, 1282.3, and 1311 to, the
Business and Professions Code, to amend Sections 186.2 and 923 of the
Penal Code, and to amend Sections 14040, 14040.5, 14043.1, 14043.2,
14043.36 14043.37, 14043.65, 14043.7, 14043.75, 14100.75, 14107,
14107.11, 14124.1, 14124.2, 14170, 14170.8, 14171.6, and 24005 of,
and to add Sections 14040.1, 14043.34, 14043.61, 14043.62, and
14123.25 to, the Welfare and Institutions Code, relating to health.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1098, Romero.  Health.
   Existing law contains provisions governing the licensure and
registration of clinical laboratories, which are administered by the
State Department of Health Services.
   This bill would make various modifications to these requirements,
including the provision of additional grounds for denial, suspension,
or revocation of licensure or registration, and exemptions from
clinical laboratory provisions relating to the retention of records.

   The bill would make it a crime, punishable as specified, to engage
in willful or wanton disregard of a person's safety that exposes the
person to a substantial risk of, or that causes, serious bodily
injury, by affecting the integrity of a biological specimen or a
clinical laboratory test or examination result, through improper
collection, handling, storage, or labeling of the specimen, or the
erroneous transcription or reporting of test or examination results.

   The bill would also make it unlawful, and subject to criminal
penalties, for any person to:  (1) except where exempt, provide any
form of payment or gratuity for human blood or any other biological
specimen provided for the purpose of clinical laboratory testing or
practice, (2) solicit, or provide any form of payment or gratuity to,
another person for the procurement of that person's blood or any
other specimen from his or her body, or (3) unless authorized to do
so, to perform venipuncture, skin puncture, or arterial puncture to
collect a biological specimen.
   Existing law authorizes the Attorney General to convene the grand
jury to investigate and consider certain criminal matters.
   This bill would authorize the Attorney General to convene the
grand jury to investigate, consider, and indict for activities
subject to penalties under the bill related to defrauding or
submitting false information to the Medi-Cal program.
   Existing law provides for the Medi-Cal program, which is
administered by the State Department of Health Services, pursuant to
which medical benefits are provided to public assistance recipients
and certain other low-income persons.
   Existing law defines a provider for the purposes of the Medi-Cal
program.
   This bill would revise the definition of a provider for that
purpose.
   Existing law provides for the State-Only Family Planning Program,
under which family planning services are provided to eligible
individuals.
   Existing law also establishes the Family Planning Access, Care,
and Treatment Waiver Program, as part of the Medi-Cal program.
   The bill would enact various provisions relating to billing for
Medi-Cal and family planning services, including provisions relating
to provider billing agents.
   Existing law provides that any person who, with intent to defraud,
presents for allowance or payment any false or fraudulent claim for
furnishing Medi-Cal program services or merchandise, knowingly
submits false information for the purpose of obtaining greater
compensation than that to which he or she is legally entitled, or
knowingly submits false information for the purpose of obtaining
authorization for obtaining Medi-Cal program services or merchandise
is guilty of a crime.
   This bill would, instead, make it a crime for any person,
including a Medi-Cal provider, an applicant for provider status, or a
billing agent, to engage in specified activities related to
defrauding or submitting false information to the Medi-Cal program,
punishable as prescribed.
   The bill would also permit, subject to specified requirements, the
forfeiture of property of persons engaging in these activities.
   Because the bill creates additional crimes, the bill would
constitute a state-mandated local program.
  The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 1241 of the Business and Professions Code is
amended to read:
   1241.  (a) This chapter applies to all clinical laboratories in
California or receiving biological specimens originating in
California for the purpose of performing a clinical laboratory test
or examination, and to all persons performing clinical laboratory
tests or examinations or engaging in clinical laboratory practice in
California or on biological specimens originating in California,
except as provided in subdivision (b).
   (b) This chapter shall not apply to any of the following clinical
laboratories, or to persons performing clinical laboratory tests or
examinations in any of the following clinical laboratories:
   (1) Those owned and operated by the United States of America, or
any department, agency, or official thereof acting in his or her
official capacity to the extent that the Secretary of the federal
Department of Health and Human Services has modified the application
of CLIA requirements to those laboratories.
   (2) Public health laboratories, as defined in Section 1206.
   (3) Those that perform clinical laboratory tests or examinations
for forensic purposes only.
   (4) Those that perform clinical laboratory tests or examinations
for research and teaching purposes only and do not report or use
patient-specific results for the diagnosis, prevention, or treatment
of any disease or impairment of, or for the assessment of the health
of, an individual.
   (5) Those that perform clinical laboratory tests or examinations
certified by the National Institutes on Drug Abuse only for those
certified tests or examinations.  However, all other clinical
laboratory tests or examinations conducted by the laboratory are
subject to this chapter.
   (6) Those that register with the State Department of Health
Services pursuant to subdivision (c) to perform blood glucose testing
for the purposes of monitoring a minor child diagnosed with diabetes
when the person performing the test has been entrusted with the care
and control of the child by the child's parent or legal guardian and
provided that all of the following occur:
   (A) The blood glucose monitoring test is performed with a blood
glucose monitoring instrument that has been approved by the federal
Food and Drug Administration for sale over the counter to the public
without a prescription.
   (B) The person has been provided written instructions by the child'
s health care provider or an agent of the child's health care
provider in accordance with the manufacturer's instructions on the
proper use of the monitoring instrument and the handling of any
lancets, test strips, cotton balls, or other items used during the
process of conducting a blood glucose test.
   (C) The person, receiving written authorization from the minor's
parent or legal guardian, complies with written instructions from the
child's health care provider, or an agent of the child's health care
provider, regarding the performance of the test and the operation of
the blood glucose monitoring instrument, including how to determine
if the results are within the normal or therapeutic range for the
child, and any restriction on activities or diet that may be
necessary.
   (D) The person complies with specific written instructions from
the child's health care provider or an agent of the child's health
care provider regarding the identification of symptoms of
hypoglycemia or hyperglycemia, and actions to be taken when results
are not within the normal or therapeutic range for the child.  The
instructions shall also contain the telephone number of the child's
health care provider and the telephone number of the child's parent
or legal guardian.
   (E) The person records the results of the blood glucose tests and
provides them to the child's parent or legal guardian on a daily
basis.
   (F) The person complies with universal precautions when performing
the testing and posts a list of the universal precautions in a
prominent place within the proximity where the test is conducted.
   (7) Those individuals who perform clinical laboratory tests or
examinations, approved by the federal Food and Drug Administration
for  sale to the public without a prescription in the form of an
over-the-counter test kit, on their own bodies or on their minor
children or legal wards.
   (c) Any place where blood glucose testing is performed pursuant to
paragraph (6) of subdivision (b) shall register by notifying the
State Department of Health Services in writing no later than 30 days
after testing has commenced.  Registrants pursuant to this
subdivision shall not be required to pay any registration or renewal
fees nor shall they be subject to routine inspection by the State
Department of Health Services.
  SEC. 2.  Section 1265 of the Business and Professions Code is
amended to read:
   1265.  (a) (1) A clinical laboratory performing clinical
laboratory tests or examinations classified as of moderate or of high
complexity under CLIA shall obtain a clinical laboratory license
pursuant to this chapter.  The department shall issue a clinical
laboratory license to any person who has applied for the license on
forms provided by the department and who is found to be in compliance
with this chapter and the regulations pertaining thereto.  No
clinical laboratory license shall be issued by the department unless
the clinical laboratory and its personnel meet the CLIA requirements
for laboratories performing tests or examinations classified as of
moderate or high complexity, or both.
   (2) A clinical laboratory performing clinical laboratory tests or
examinations subject to a certificate of waiver or a certificate of
provider-performed microscopy under CLIA, shall register with the
department.  The department shall issue a clinical laboratory
registration to any person who has applied for the registration on
forms provided by the department and is found to be in compliance
with this chapter, the regulations pertaining thereto, and the CLIA
requirements for either a certificate of waiver or a certificate of
provider-performed microscopy.
   (b) An application for a clinical laboratory license or
registration shall include the name or names of the owner or the
owners, the name or names of the laboratory director or directors,
the name and location of the laboratory, a list of the clinical
laboratory tests or examinations performed by the laboratory by name
and total number of test procedures and examinations performed
annually (excluding tests the laboratory may run for quality control,
quality assurance, or proficiency testing purposes).  The
application shall also include a list of the tests and the test kits,
methodologies, and laboratory equipment used, and the qualifications
(educational background, training, and experience) of the personnel
directing and supervising the laboratory and performing the
laboratory examinations and test procedures, and any other relevant
information as may be required by the department.  If the laboratory
is performing tests subject to a provider-performed microscopy
certificate, the name of the provider or providers performing those
tests shall be included on the application.  Application shall be
made by the owners of the laboratory and the laboratory directors
prior to its opening.  A license or registration to conduct a
clinical laboratory if the owners are not the laboratory directors
shall be issued jointly to the owners and the laboratory directors
and the license or registration shall include any information as may
be required by the department.  The owners and laboratory directors
shall be severally and jointly responsible to the department for the
maintenance and conduct thereof or for any violations of this chapter
and regulations pertaining thereto.
   (c) The department shall not issue a license or registration until
it is satisfied that the clinical laboratory will be operated within
the spirit and intent of this chapter, that the owners and
laboratory directors are each of good moral character, and that the
granting of the license will not be in conflict with the interests of
public health.
   (d) A separate license or registration shall be obtained for each
laboratory location, with the following exceptions:
   (1) Laboratories that are not at a fixed location, that is,
laboratories that move from one testing site to another, such as
mobile units providing laboratory testing, health screening fairs, or
other temporary testing locations, may apply for and obtain one
license or registration for the designated primary site or home base,
using the address of that primary site.
   (2) Not-for-profit, or federal, state, or local government
laboratories that engage in limited (not more than a combination of
15 moderately complex or waived tests, as defined under CLIA, per
license) public health testing may apply for and obtain a single
license or registration.
   (3) Laboratories within a hospital that are located at contiguous
buildings on the same campus and under common direction, may file a
single application or multiple applications for a license or
registration of laboratory locations within the same campus or street
address.
   (4) Locations within a single street and city address that are
under common ownership may apply for and obtain a single license or
registration or multiple licenses or registrations, at the discretion
of the owner or owners.
   (e) (1) A license or registration shall be valid for one year
unless revoked or suspended.  A clinical laboratory license or
registration shall be automatically revoked 30 days from a major
change of laboratory directorship or ownership.  The clinical
laboratory shall be required to submit a completed application for a
new clinical laboratory license or registration within those 30 days
or cease engaging in clinical laboratory practice.
   (2) If a clinical laboratory intends to continue to engage in
clinical laboratory practice during the 30 days after a major change
in directorship occurs and before the laboratory license or
registration is automatically revoked, the laboratory owner may
appoint an interim director who meets the requirements of this
chapter and CLIA.  The interim director shall be appointed within
five business days of the major change of the directorship.  Written
notice shall be provided to the department of the appointment of the
laboratory director pursuant to this paragraph within five business
days of the appointment.
   (f) If the department does not within 60 days after the date of
receipt of the application issue a license or registration, it shall
state the grounds and reasons for its refusal in writing, serving a
copy upon the applicant by certified mail addressed to the applicant
at his or her last known address.
   (g) The department shall be notified in writing by the laboratory
owners or delegated representatives of the owners and the laboratory
directors of any change in ownership, directorship, name, or
location, including the addition or deletion of laboratory owners or
laboratory directors within 30 days.  However, notice of change in
ownership shall be the responsibility of both the current and new
owners. Laboratory owners and directors to whom the current license
or registration is issued shall remain jointly and severally
responsible to the department for the operation, maintenance, and
conduct of the clinical laboratory and for any violations of this
chapter or the regulations adopted thereunder, including any failure
to provide the notifications required by this subdivision, until
proper notice is received by the department.  In addition, failure of
the laboratory owners and directors to notify the department within
30 days of any change in laboratory directors, including any
additions or deletions, shall result in the automatic revocation of
the clinical laboratory's license or registration.
   (h) The withdrawal of an application for a license or registration
or for a renewal of a license, or registration, issuable under this
chapter, shall not, after the application has been filed with the
department, deprive the department of its authority to institute or
continue a proceeding against the applicant for denial of the
license, registration, or renewal upon any ground provided by law or
to enter an order denying the license, registration, or renewal upon
any such ground, unless the department consents in writing to the
withdrawal.
   (i) The suspension, expiration, or forfeiture by operation of law
of a license or registration issued under this chapter, or its
suspension, forfeiture, or cancellation by order of the department or
by order of a court of law, or its surrender without the written
consent of the department, shall not deprive the department of its
authority to institute or continue an action against a license or
registration issued under this chapter or against the laboratory
owner or laboratory director upon any ground provided by law or to
enter an order suspending or revoking the license or registration
issued under this chapter.
   (j) (1) Whenever a clinical laboratory ceases operations, the
laboratory owners, or delegated representatives of the owners, and
the laboratory directors shall notify the department of this fact, in
writing,  within 30 calendar days from the date a clinical
laboratory ceases operation.  For purposes of this subdivision, a
laboratory ceases operations when it suspends the performance of all
clinical laboratory tests or examinations for 30 calendar days at the
location for which the clinical laboratory is licensed or
registered.
   (2) (A) Notwithstanding any other provision of law, owners and
laboratory directors of all clinical laboratories, including those
laboratories that cease operations, shall preserve medical records
and laboratory records, as defined in this section, for three years
from the date of testing, examination, or purchase, unless a longer
retention period is required pursuant to any other provision of law,
and shall maintain an ability to provide those records when requested
by the department or any duly authorized representative of the
department.
   (B) For purposes of this subdivision, "medical records" means the
test requisition or test authorization, or the patient's chart or
medical record, if used as the test requisition, the final and
preliminary test or examination result, and the name of the person
contacted if the laboratory test or examination result indicated an
imminent life-threatening result or was of panic value.
   (C) For purposes of this subdivision, "laboratory records" means
records showing compliance with CLIA and this chapter during a
laboratory's operation that are actual or true copies, either
photocopies or electronically reproducible copies, of records for
patient test management, quality control, quality assurance, and all
invoices documenting the purchase or lease of laboratory equipment
and test kits, reagents, or media.
   (D) Information contained in medical records and laboratory
records shall be confidential, and shall be disclosed only to
authorized persons in accordance with federal, state, and local laws.

   (3) The department or any person injured as a result of a
laboratory's abandonment or failure to retain records pursuant to
this section may bring an action in a court of proper jurisdiction
for any reasonable amount of damages suffered as a result thereof.
  SEC. 3.  Section 1269.5 is added to the Business and Professions
Code, to read:
   1269.5.  The department may deny, suspend, or revoke any license,
registration, or certificate issued under this chapter for
performance by unlicensed laboratory personnel of any activity that
is not authorized by Section 1269.
  SEC. 4.  Section 1281.1 is added to the Business and Professions
Code, to read:
   1281.1.  It is unlawful for any person, including a person who
owns, operates, or directs a clinical laboratory, to provide, offer,
or solicit, any form of payment or gratuity for human blood or any
other biological specimen provided for the purpose of clinical
laboratory testing or clinical laboratory practice, unless the person
is serving as an agent of a clinical laboratory or another facility
legally utilizing those specimens only for purposes of research or
teaching or for quality assurance purposes, or is an entity licensed
under Chapter 4 (commencing with Section 1600) of Division 2 of the
Health and Safety Code.
  SEC. 5.  Section 1282.2 is added to the Business and Professions
Code, to read:
   1282.2.  It is unlawful for any person to perform venipuncture,
skin puncture, or arterial puncture to collect a biological specimen
unless he or she is authorized to do so under this chapter, the
regulations adopted thereunder, or under other provisions of law.
  SEC. 6.  Section 1282.3 is added to the Business and Professions
Code, to read:
   1282.3.  (a) It is unlawful for any person to act with willful or
wanton disregard for a person's safety that exposes the person to a
substantial risk of, or that causes, great bodily injury by affecting
the integrity of a clinical laboratory test or examination result
through improper collection, handling, storage, or labeling of the
biological specimen or the erroneous transcription or reporting of
clinical laboratory test or examination results.
   (b) Notwithstanding Section 1287, a violation of this section
shall be punished, upon first conviction, by imprisonment in a county
jail for a period of not more than one year, or by imprisonment in a
state prison for  16 months, or two or three years, by a fine not
exceeding fifty thousand dollars ($50,000), or by both this fine and
imprisonment.  A second or subsequent conviction is punishable by
imprisonment in the state prison for two, four, or six years, by a
fine not exceeding fifty thousand dollars ($50,000), or by both this
fine and imprisonment.
   (c) The enforcement remedies provided under this section are not
exclusive, and shall not preclude the use of any other criminal or
civil remedy.  However, an act or omission punishable in different
ways by this section and any other provision of law shall not be
punished under more than one provision.  Under those circumstances,
the penalty to be imposed shall be determined as set forth in Section
654 of the Penal Code.
  SEC. 7.  Section 1287 of the Business and Professions Code is
amended to read:
   1287.  (a) Any person who violates any provision of this chapter
is guilty of a misdemeanor punishable upon conviction by imprisonment
in the county jail for a period not exceeding six months or by fine
not exceeding one thousand dollars ($1,000) or by both.
   (b) (1) Notwithstanding subdivision (a), a violation of Section
1281.1 is a public offense and is punishable upon conviction by
imprisonment in the county jail for not more than one year, or by a
fine not exceeding ten thousand dollars ($10,000), or by both that
imprisonment and fine.
   (2) Notwithstanding subdivision (a), a violation of Section 1282.2
is a public offense and is punishable upon conviction by
imprisonment in the county jail for not more than one year, or by a
fine not exceeding one thousand dollars ($1,000), or by both that
imprisonment and fine.
   (3) The enforcement remedies provided under this section are not
exclusive, and shall not preclude the use of any other criminal or
civil remedy.  However, an act or omission punishable in different
ways by this section and any other provision of law shall not be
punished under more than one provision.  Under those circumstances,
the penalty to be imposed shall be determined as set forth in Section
654 of the Penal Code.
  SEC. 8.  Section 1301 of the Business and Professions Code is
amended to read:
   1301.  (a) The annual renewal fee for a clinical laboratory
license or registration set under this chapter shall be paid during
the 30-day period before the expiration date of the license or
registration.  Failure to pay the annual fee in advance during the
time the license remains in force shall, ipso facto, work a
forfeiture of said license after a period of 60 days from the
expiration date of the license or registration.
   (b) (1) The department shall give written notice to all persons
licensed pursuant to Sections 1260, 1260.1, 1261, 1261.5, 1262, 1264,
or 1270 30 days in advance of the regular renewal date that a
renewal fee has not been paid.  In addition, the department shall
give written notice to licensed clinical laboratory bioanalysts or
doctoral degree specialists and clinical laboratory scientists or
limited clinical laboratory scientists by registered or certified
mail 90 days in advance of the expiration of the fifth year that a
renewal fee has not been paid and if not paid before the expiration
of the fifth year of delinquency the licensee may be subject to
reexamination.
   (2) If the renewal fee is not paid for five or more years, the
department may require an examination before reinstating the license,
except that no examination shall be required as a condition for
reinstatement if the original license was issued without an
examination.  No examination shall be required for reinstatement if
the license was forfeited solely by reason of nonpayment of the
renewal fee if the nonpayment was for less than five years.
   (3) If the license is not renewed within 60 days after its
expiration, the licensee, as a condition precedent to renewal, shall
pay the delinquency fee identified in subdivision (l) of Section
1300, in addition to the renewal fee in effect on the last preceding
regular renewal date.  Payment of the delinquency fee will not be
necessary if within 60 days of the license expiration date the
licensee files with the department an application for inactive
status.
  SEC. 9.  Section 1311 is added to the Business and Professions
Code, to read:
   1311.  The department shall have three years from the date of a
violation of this chapter or of a regulation adopted thereunder to
file a civil or administrative action.
  SEC. 10.  Section 1324 of the Business and Professions Code is
amended to read:
   1324.  Except for a person or entity whose license was revoked
automatically under Section 1265, no person or entity who has owned
or operated a clinical laboratory that had its license or
registration revoked may, within two years of the revocation of the
license or registration, own or operate a laboratory for which a
license or registration has been issued under this chapter.
  SEC. 11.  Section 186.2 of the Penal Code is amended to read:
   186.2.  For purposes of this chapter, the following definitions
apply:
   (a) "Criminal profiteering activity" means any act committed or
attempted or any threat made for financial gain or advantage, which
act or threat may be charged as a crime under any of the following
sections:
   (1) Arson, as defined in Section 451.
   (2) Bribery, as defined in Sections 67, 67.5, and 68.
   (3) Child pornography or exploitation, as defined in subdivision
(b) of Section 311.2, or Section 311.3 or 311.4, which may be
prosecuted as a felony.
   (4) Felonious assault, as defined in Section 245.
   (5) Embezzlement, as defined in Sections 424 and 503.
   (6) Extortion, as defined in Section 518.
   (7) Forgery, as defined in Section 470.
   (8) Gambling, as defined in Sections 337a to 337f, inclusive, and
Section 337i, except the activities of a person who participates
solely as an individual bettor.
   (9) Kidnapping, as defined in Section 207.
   (10) Mayhem, as defined in Section 203.
   (11) Murder, as defined in Section 187.
   (12) Pimping and pandering, as defined in Section 266.
   (13) Receiving stolen property, as defined in Section 496.
   (14) Robbery, as defined in Section 211.
   (15) Solicitation of crimes, as defined in Section 653f.
   (16) Grand theft, as defined in Section 487.
   (17) Trafficking in controlled substances, as defined in Sections
11351, 11352, and 11353 of the Health and Safety Code.
   (18) Violation of the laws governing corporate securities, as
defined in Section 25541 of the Corporations Code.
   (19) Any of the offenses contained in Chapter 7.5 (commencing with
Section 311) of Title 9, relating to obscene matter, or in Chapter
7.6 (commencing with Section 313) of Title 9, relating to harmful
matter that may be prosecuted as a felony.
   (20) Presentation of a false or fraudulent claim, as defined in
Section 550.
   (21) False or fraudulent activities, schemes, or artifices, as
described in Section 14107 of the Welfare and Institutions Code.
   (22) Money laundering, as defined in Section 186.10.
   (23) Offenses relating to the counterfeit of a registered mark, as
specified in Section 350.
   (24) Offenses relating to the unauthorized access to computers,
computer systems, and computer data, as specified in Section 502.
   (25) Conspiracy to commit any of the crimes listed above, as
defined in Section 182.
   (26) Engaging in a pattern of criminal gang activity, as defined
in subdivision (e) of Section 186.22.
   (b) "Pattern of criminal profiteering activity" means engaging in
at least two incidents of criminal profiteering, as defined by this
act, that meet the following requirements:
   (1) Have the same or a similar purpose, result, principals,
victims, or methods of commission, or are otherwise interrelated by
distinguishing characteristics.
   (2) Are not isolated events.
   (3) Were committed as a criminal activity of organized crime.
   Acts that would constitute a "pattern of criminal profiteering
activity" may not be used by a prosecuting agency to seek the
remedies provided by this chapter unless the underlying offense
occurred after the effective date of this chapter and the prior act
occurred within 10 years, excluding any period of imprisonment, of
the commission of the underlying offense.  A prior act may not be
used by a prosecuting agency to seek remedies provided by this
chapter if a prosecution for that act resulted in an acquittal.
   (c) "Prosecuting agency" means the Attorney General or the
district attorney of any county.
   (d) "Organized crime" means crime that is of a conspiratorial
nature and that is either of an organized nature and seeks to supply
illegal goods and services such as narcotics, prostitution, loan
sharking, gambling, and pornography, or that, through planning and
coordination of individual efforts, seeks to conduct the illegal
activities of arson for profit, hijacking, insurance fraud,
smuggling, operating vehicle theft rings, or systematically
encumbering the assets of a business for the purpose of defrauding
creditors.  "Organized crime" also means crime committed by a
criminal street gang, as defined in subdivision (f) of Section
                                        186.22.  "Organized crime"
also means false or fraudulent activities, schemes, or artifices, as
described in Section 14107 of the Welfare and Institutions Code.
   (e) "Underlying offense" means an offense enumerated in
subdivision (a) for which the defendant is being prosecuted.
  SEC. 12.  Section 923 of the Penal Code is amended to read:
   923.  (a) Whenever the Attorney General considers that the public
interest requires, he or she may, with or without the concurrence of
the district attorney, direct the grand jury to convene for the
investigation and consideration of those matters of a criminal nature
that he or she desires to submit to it.  He or she may take full
charge of the presentation of the matters to the grand jury, issue
subpoenas, prepare indictments, and do all other things incident
thereto to the same extent as the district attorney may do.
   (b) Whenever the Attorney General considers that the public
interest requires, he or she may, with or without the concurrence of
the district attorney, petition the court to impanel a special grand
jury to investigate, consider, or issue indictments for any of the
activities subject to fine, imprisonment, or asset forfeiture under
Section 14107 of the Welfare and Institutions Code.  He or she may
take full charge of the presentation of the matters to the grand
jury, issue subpoenas, prepare indictments, and do all other things
incident thereto to the same extent as the district attorney may do.
If the evidence presented to the grand jury shows the commission of
an offense or offenses for which jurisdiction would be in a county
other than the county where the grand jury is impaneled, the Attorney
General, with or without the concurrence of the district attorney in
the county with jurisdiction over the offense or offenses, may
petition the court to impanel a special grand jury in that county.
Notwithstanding any other provision of law, upon request of the
Attorney General, a grand jury convened by the Attorney General
pursuant to this subdivision may submit confidential information
obtained by that grand jury, including, but not limited to documents
and testimony, to a second grand jury that has been impaneled at the
request of the Attorney General pursuant to this subdivision in any
other county where venue for an offense or offenses shown by evidence
presented to the first grand jury is proper.  All confidentiality
provisions governing information, testimony, and evidence presented
to a grand jury shall be applicable except as expressly permitted by
this subdivision.  The Attorney General shall inform the grand jury
that transmits confidential information and the grand jury that
receives confidential information of any exculpatory evidence, as
required by Section 939.71.  The grand jury that transmits
information to another grand jury shall include the exculpatory
evidence disclosed by the Attorney General in the transmission of the
confidential information.  The Attorney General shall inform both
the grand jury transmitting the confidential information and the
grand jury receiving that information of their duties under Section
939.7.  A special grand jury convened pursuant to this subdivision
shall be in addition to the other grand juries authorized by this
chapter or Chapter 2 (commencing with Section 893).
   (c) Upon certification by the Attorney General, a statement of the
costs directly related to the impanelment and activities of the
grand jury pursuant to subdivision (b) from the presiding judge of
the superior court where the grand jury was impaneled shall be
submitted for state reimbursement of the costs to the county.
  SEC. 13.  Section 14040 of the Welfare and Institutions Code is
amended to read:
   14040.  (a) Each contract for fiscal intermediary services shall
allow, to the extent practicable, providers to utilize electronic
means for transmitting claims to the fiscal intermediary contractor.
Means of transmission, and the manner and format used, shall be
approved by the director.  In determining which electronic means are
acceptable, the director shall consider magnetic tape,
computer-to-computer via telephone, diskettes, and any other methods
which may become available through technological advancements.
   (b) A provider, as defined in Section 14043.1, may assign
signature authority for transmission of claims to the provider's
authorized representative or the registered billing agent of the
provider identified to the department pursuant to subdivision (c) of
Section 14040.5.
   (c) The department shall develop reasonable standards for
participation and continued participation by providers and billing
agents in the use of claims transmission methods utilized pursuant to
this section.  These standards shall be designed to ensure that
providers and billing agents submit technically complete claims and
to reduce the potential for fraud and abuse.  The department shall
notify providers and billing agents of any planned changes to the
claims transmission standards prior to the implementation of the
changes.  A "technically complete claim" means any billing request
for payment from a provider or the billing agent of the provider,
including an original claim, claim inquiry, or appeal, that is
submitted on the correct Medi-Cal claim form or electronic billing
format, is fully and accurately completed, and includes all
information and documentation required to be submitted on or with the
claim pursuant to Medi-Cal billing and documentation requirements.
   (d) To the extent required by federal and state law, the fiscal
intermediary shall retain claim data submitted by providers or the
billing agent of the provider pursuant to this section.  The
department shall, however, return to a provider or the billing agent
of the provider original tapes, diskettes, and any other similar
devices that are used by the provider or the billing agent of the
provider pursuant to this section.
   (e) In order to reduce the amount of paperwork or attachments
which are required to be completed by a provider or the billing agent
of the provider submitting a claim for reimbursement under this
chapter to the fiscal intermediary, the department shall direct the
fiscal intermediary to investigate and develop the means to
incorporate as much information as possible on the electronic format.

   (f) Each provider and billing agent submitting claims shall be
responsible for ensuring that each claim submitted for reimbursement
for services, goods, supplies, or merchandise rendered or supplied by
the provider to a Medi-Cal beneficiary or under the Medi-Cal program
meets the standards established by the department pursuant to this
section.
  SEC. 14.  Section 14040.1 is added to the Welfare and Institutions
Code, to read:
   14040.1.  (a) "Billing agent" or "billing agent of the provider"
means any individual, partnership, group, association, corporation,
institution, or entity, and the officers, directors, owners, managing
employees, or agents of any partnership, group, association,
corporation, institution, or entity, that submits claims on behalf of
the provider, as defined in Section 14043.1, for reimbursement for
services, goods, supplies, or merchandise rendered or provided
directly or indirectly to a Medi-Cal beneficiary or under the
Medi-Cal program.  As used in this section a billing agent shall not
include an authorized representative of a provider billing solely for
that provider, a provider wholly owned entity billing solely for the
provider, or a clinic licensed pursuant to subdivision (a) of
Section 1204 of the Health and Safety Code or exempt from licensure
pursuant to subdivision (c) of Section 1206 of the Health and Safety
Code when preparing and submitting claims for services provided on
behalf of the clinic.  For purposes of this subdivision, an
authorized representative shall be either an individual who is an
employee of the provider or an individual with a familial
relationship to the provider.  For purposes of this section and
Section 14040.5, an authorized representative, a provider wholly
owned entity billing solely for the provider, or a clinic that is
licensed pursuant to subdivision (a) of Section 1204 of the Health
and Safety Code or exempt from licensure pursuant to subdivision (c)
of Section 1206 of the Health and Safety Code, when preparing and
submitting claims for services provided on behalf of the clinic,
shall be considered a provider.
   (b) The department shall establish standards for the registration
or continued registration of each billing agent.  The standards shall
establish time periods, no longer than a year from the date the
standards become effective, after which, no billing agent shall
submit a claim on behalf of a provider, as defined in Section
14043.1, for reimbursement for services, goods, supplies, or
merchandise rendered or provided directly or indirectly by the
provider to a Medi-Cal beneficiary or under the Medi-Cal program,
unless that billing agent has been registered with the department.
The department shall establish the standards for the registration or
continued registration of billing agents pursuant to this
subdivision, in consultation with interested parties, by the adoption
of emergency regulations in accordance with the Administrative
Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code).  The adoption of
these emergency regulations or readoption of the regulations shall be
deemed to be an emergency necessary for the immediate preservation
of the public peace, health and safety, or general welfare.
Notwithstanding Chapter 3.5 (commencing with Section 11340 of Part 1
of Division 3 of Title 2 of the Government Code, emergency
regulations adopted or readopted pursuant to this subdivision shall
be exempt from review by the Office of Administrative Law.  The
emergency regulations authorized by this subdivision shall be
submitted to the Office of Administrative Law for filing with the
Secretary of State and publication in the California Code of
Regulations.
   (c) The department may complete a background check on applicants
for registration or continued registration as a billing agent, for
the purpose of verifying the accuracy of information provided by an
applicant for registration or continued registration as a billing
agent or in order to prevent fraud and abuse.  The background check
may include, but not be limited to, onsite inspection, review of
business records, and data searches.
   (d) As a condition of registration, or continued registration, as
a billing agent, an applicant for registration as a billing agent
shall provide to the department a surety bond of not less than fifty
thousand dollars ($50,000).  This subdivision shall become operative
only if the director executes a declaration, that shall be retained
by the director, stating that the surety bonds described in this
paragraph are commercially offered throughout the state and by more
than one vendor.
  SEC. 15.  Section 14040.5 of the Welfare and Institutions Code is
amended to read:
   14040.5.  (a) A provider may, by written contract, do either of
the following:
   (1) Authorize a billing agent to submit claims, including
electronic claims, on behalf of the provider for reimbursement for
services, goods, supplies, or merchandise provided by the provider to
the Medi-Cal program or a Medi-Cal beneficiary.
   (2) Assign signature authority for transmission of the claims by
the authorized billing agent.
   (b) If a contract as described in subdivision (a) is entered into,
the contract shall meet the requirements of Section 447.10 of Title
42 of the Code of Federal Regulations or shall have been approved by
the federal Health Care Financing Administration for purposes of the
Medicare program.
   (c) Any provider intending to use a billing agent to submit claims
for reimbursements to the Medi-Cal program shall provide, at least
30 days prior to the submission of any claims for reimbursement by
the billing agent, written notification to the director of the name,
including known legal and any known fictitious or "doing business as"
names used by the billing agent, the address, and the telephone
number of the billing agent.
   (d) Billing agents shall register with the director and shall
obtain a unique identifier prior to submitting any claims for
reimbursement.  This unique identifier shall be part of each claim
for reimbursement submitted by the billing agent.
   (e) (1) Any Medi-Cal claim submitted by a billing  agent or
provider failing to comply with the requirements of this section or
Section 14040 or 14040.1, or the regulations adopted pursuant to
these sections, shall be subject to denial by the director.
   (2) The director may deny, suspend, or revoke the registration or
continued registration of a billing agent based upon any of the
following grounds:
   (A) Failure of the billing agent to comply with this section or
Section 14040.1 or the regulations adopted under these sections.
   (B) Involvement of a billing agent in illegal submission of
claims.
   (C) The billing agent is under investigation for fraud or abuse,
as defined in Section 14043.1, by the department or any federal,
state, or local law enforcement agency.
   (3) The director may immediately revoke or suspend the
registration or continued registration of a billing agent upon the
involvement of that billing agent in the filing of false or
misleading information on claims submitted for services allegedly
rendered, or when a billing agent has demonstrated a pattern of
filing claims that are not technically complete claims as defined in
subdivision (c) of Section 14040.  The director shall not take action
to revoke or suspend a billing agent's registration or continued
registration when the falsity or misleading nature of the information
was the result of the provider's actions and not the billing agent'
s.
   (4) Proceedings for suspension or revocation of the registration
or continued registration of a billing agent pursuant to this section
shall be conducted in accordance with Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code, except that hearings may be conducted by departmental hearing
officers appointed by the director.  The director may periodically
contract with the Office of Administrative Hearings to conduct these
hearings.
   (5) The director shall provide written notification outlining the
reasons for the proposed action to the billing agent 30 days in
advance of a proposed suspension or revocation and shall allow the
billing agent to demonstrate within those 30 days by comment why the
suspension or revocation notice should not be issued.
   (6) If after consideration of the billing agent's comment, the
director determines that the suspension or revocation is nonetheless
warranted, the director shall notify the billing agent of the
suspension or revocation and the effective date thereof and at the
same time shall serve the billing agent with an accusation.  In
addition, the director shall send each provider utilizing the
services of the billing agent written notice of the suspension or
revocation of the billing agent.  The suspension or revocation of the
billing agent shall take effect 15 days from the date of the
notification of the billing agent and service of the accusation.  To
the extent allowed by federal law, the director may waive any claims
submission requirement to assist a provider in submitting or
resubmitting claims to the Medi-Cal program when they are delayed
because of a billing agent's suspension or revocation.  Upon receipt
of a notice of defense by the billing agent, the director shall set
the matter for hearing within 30 days of the receipt of the notice.
The suspension or revocation shall remain in effect until the hearing
is completed and the director has made a final determination on the
merits. The suspension or revocation shall, however, be deemed
vacated if the director fails to make a final determination on the
merits within 60 days of the completion of the original hearing.
   (7) Paragraph (4) of this subdivision shall not apply where the
suspension or revocation of a billing agent is based upon the
conviction for any crime involving fraud, abuse of the Medi-Cal
program, or suspension from the federal Medicare or medicaid
programs, or where the billing agent has entered into a settlement in
lieu of conviction for fraud or abuse in any government program,
within the previous 10 years.  In those instances, suspension or
revocation shall be automatic and not subject to administrative
appeal or hearing.  In those instances, the director shall send each
provider utilizing the services of the billing agent written notice
of the automatic suspension or revocation of the billing agent.  To
the extent allowed by federal law, the director may waive any claims
submission requirement to assist a provider in submitting or
resubmitting claims to the Medi-Cal program when they are delayed
because of a billing agent's automatic suspension or revocation.
   (8) Notwithstanding Section 100171 of the Health and Safety Code,
proceedings for the denial of the registration of a billing agent
pursuant to this section shall be conducted in accordance with
Section 14043.65.  This subdivision shall not apply where the denial
is based upon conviction of any crime involving fraud or abuse of the
Medi-Cal program or the federal medicaid or Medicare programs, or
exclusion by the federal government from the medicaid or Medicare
programs.  In this case, the denial shall be automatic and not
subject to administrative appeal or hearing.
   (f) For purposes of this section, "billing agent" has the same
meaning as defined in Section 14040.1.
   (g) As used in this section "provider" has the same meaning as
defined in Section 14043.1.
  SEC. 16.  Section 14043.1 of the Welfare and Institutions Code is
amended to read:
   14043.1.  As used in this article:
   (a) "Abuse" means either of the following:
   (1) Practices that are inconsistent with sound fiscal or business
practices and result in unnecessary cost to the federal medicaid and
Medicare programs, the Medi-Cal program, another state's medicaid
program, or other health care programs operated, or financed in whole
or in part, by the federal government or any state or local agency
in this state or any other state.
   (2) Practices that are inconsistent with sound medical practices
and result in reimbursement by the federal medicaid and Medicare
programs, the Medi-Cal program or other health care programs
operated, or financed in whole or in part, by the federal government
or any state or local agency in this state or any other state, for
services that are unnecessary or for substandard items or services
that fail to meet professionally recognized standards for health
care.
   (b) "Applicant" means any individual, partnership, group,
association, corporation, institution, or entity, and the officers,
directors, owners, managing employees, or agents thereof, that
applies to the department for enrollment as a provider in the
Medi-Cal program.
   (c) "Convicted" means any of the following:
   (1) A judgment of conviction has been entered against an
individual or entity by a federal, state, or local court, regardless
of whether there is a posttrial motion or an appeal pending or the
judgment of conviction or other record relating to the criminal
conduct has been expunged or otherwise removed.
   (2) A federal, state, or local court has made a finding of guilt
against an individual or entity.
   (3) A federal, state, or local court has accepted a plea of guilty
or nolo contendere by an individual or entity.
   (4) An individual or entity has entered into participation in a
first offender, deferred adjudication, or other program or
arrangement where judgment of conviction has been withheld.
   (d) "Fraud" means an intentional deception or misrepresentation
made by a person with the knowledge that the deception could result
in some unauthorized benefit to himself or herself or some other
person.  It includes any act that constitutes fraud under applicable
federal or state law.
   (e) "Provider" means any individual, partnership, group,
association, corporation, institution, or entity, and the officers,
directors, owners, managing employees, or agents of any partnership,
group association, corporation, institution, or entity, that provides
services, goods, supplies, or merchandise, directly or indirectly,
to a Medi-Cal beneficiary and that has been enrolled in the Medi-Cal
program.
   (f) "Enrolled or enrollment in the Medi-Cal program" means
authorized under any and all processes by the department or its
agents or contractors to receive, directly or indirectly,
reimbursement for the provision of services, goods, supplies, or
merchandise to a Medi-Cal beneficiary.
   (g) "Professionally recognized standards of health care" means
statewide or national standards of care, whether in writing or not,
that professional peers of the individual or entity whose provision
of care is an issue, recognize as applying to those peers practicing
or providing care within a state.  When the United States Department
of Health and Human Services has declared a treatment modality not to
be safe and effective, practitioners that employ that treatment
modality shall be deemed not to meet professionally recognized
standards of health care.  This definition shall not be construed to
mean that all other treatments meet professionally recognized
standards of care.
   (h) "Unnecessary or substandard items or services" means those
that are either of the following:
   (1) Substantially in excess of the provider's usual charges or
costs for the items or services.
   (2) Furnished, or caused to be furnished, to patients, whether or
not covered by Medicare, medicaid, or any of the state health care
programs to which the definitions of applicant and provider apply,
and which are substantially in excess of the patient's needs, or of a
quality that fails to meet professionally recognized standards of
health care.  The department's determination that the items or
services furnished were excessive or of unacceptable quality shall be
made on the basis of information, including sanction reports, from
the following sources:
   (A) The professional review organization for the area served by
the individual or entity.
   (B) State or local licensing or certification authorities.
   (C) Fiscal agents or contractors, or private insurance companies.

   (D) State or local professional societies.
   (E) Any other sources deemed appropriate by the department.
  SEC. 17.  Section 14043.2 of the Welfare and Institutions Code is
amended to read:
   14043.2.  (a) Whether or not regulations for certification are
adopted under Section 14043.15, in order to be enrolled as a
provider, or for enrollment as a provider to continue, an applicant
or provider may be required to sign a provider agreement and shall
disclose all information as required in federal medicaid regulations
and any other information required by the department.  Applicants,
providers, and persons with an ownership or control interest, as
defined in federal medicaid regulations, shall submit their social
security number or numbers to the department, to the full extent
allowed under federal law.  The director may designate the form of a
provider agreement by provider type.  Failure to disclose the
required information, or the disclosure of false information, shall
result in denial of the application for enrollment or shall make the
provider subject to temporary suspension from the Medi-Cal program,
which shall include temporary deactivation of all provider numbers
used by the provider to obtain reimbursement from the Medi-Cal
program.
   (b) The director shall notify the provider of the temporary
suspension and deactivation of the provider's Medi-Cal provider
number or numbers and the effective date thereof.  Notwithstanding
Section 100171 of the Health and Safety Code and Section 14123,
proceedings after the imposition of sanctions provided for in
subdivision (a) shall be in accordance with Section 14043.65.
  SEC. 18.  Section 14043.34 is added to the Welfare and Institutions
Code, to read:
   14043.34.  (a) As a condition of a pharmacy's participation in the
Medi-Cal program, the pharmacy shall have in stock and regularly
dispense prescription drugs.
   (b) For purposes of this section, "prescription drugs" means any
drug unsafe for self use by a person, and includes either of the
following:
   (1) Any drug that bears the legend:  "Rx Only" or "Caution:
federal law prohibits dispensing without prescription" or words of
similar import.
   (2) Any other drug that by federal or state law can be lawfully
dispensed by the prescription of a licensed physician and surgeon.
  SEC. 19.  Section 14043.36 of the Welfare and Institutions Code is
amended to read:
   14043.36.  (a) The department shall not enroll any applicant that
has been convicted of any felony or misdemeanor involving fraud or
abuse in any government program, or related to neglect or abuse of a
patient in connection with the delivery of a health care item or
service, or in connection with the interference with or obstruction
of any investigation into health care related fraud or abuse or that
has been found liable for fraud or abuse in any civil proceeding, or
that has entered into a settlement in lieu of conviction for fraud or
abuse in any government program, within the previous 10 years.  In
addition, the department may deny enrollment to any applicant that,
at the time of application, is under investigation by the department
or any state, local, or federal government law enforcement agency for
fraud or abuse pursuant to Subpart A (commencing with Section
455.12) of Part 455 of Title 42 of the Code of Federal Regulations.
The department shall not deny enrollment to an otherwise qualified
applicant whose felony or misdemeanor charges did not result in a
conviction solely on the basis of the prior charges.  If it is
discovered that a provider is under investigation by the department
or any state, local, or federal government law enforcement agency for
fraud or abuse, that provider shall be subject to temporary
suspension from the Medi-Cal program, which shall include temporary
deactivation of all provider numbers used by the provider to obtain
reimbursement from the Medi-Cal program.
   (b) The director shall notify in writing the provider of the
temporary suspension and deactivation of the provider's Medi-Cal
provider number or numbers, which shall take effect 15 days from the
date of the notification.  Notwithstanding Section 100171 of the
Health                                                  and Safety
Code, proceedings after the imposition of sanctions provided for in
subdivision (a) shall be in accordance with Section 14043.65.
  SEC. 20.  Section 14043.37 of the Welfare and Institutions Code is
amended to read:
   14043.37.  The department may complete a background check on
applicants for the purpose of verifying the accuracy of the
information provided to the department for purposes of enrolling in
the Medi-Cal program and in order to prevent fraud and abuse.  The
background check may include, but is not limited to, the following:
   (a) Onsite inspection prior to enrollment.
   (b) Review of business records.
   (c) Data searches.
  SEC. 21.  Section 14043.61 is added to the Welfare and Institutions
Code, to read:
   14043.61.  (a) A provider shall be subject to suspension if claims
for payment are submitted under any provider number used by the
provider to obtain reimbursement from the Medi-Cal program for the
services, goods, supplies, or merchandise provided, directly or
indirectly, to a Medi-Cal beneficiary, by an individual or entity
that is suspended, excluded, or otherwise ineligible because of a
sanction to receive, directly or indirectly, reimbursement from the
Medi-Cal program and the individual or entity is listed on either the
Suspended and Ineligible Provider List, published by the department,
to identify suspended and otherwise ineligible providers, or any
list published by the federal Office of Inspector General regarding
the suspension or exclusion of individuals or entities from the
federal Medicare and medicaid programs, to identify suspended,
excluded, or otherwise ineligible providers.
   (b) Notwithstanding Section 100171 of the Health and Safety Code,
the imposition of the sanction provided for in subdivision (a) shall
be appealable in accordance with Section 14043.65.
  SEC. 22.  Section 14043.62 is added to the Welfare and Institutions
Code, to read:
   14043.62.  (a) The department shall deactivate, immediately and
without prior notice, the provider numbers used by a provider to
obtain reimbursement from the Medi-Cal program when warrants or
documents mailed to a provider's mailing address or its pay to
address, if any, or its service or business address, are returned by
the United States Postal Service as not deliverable or when a
provider has not submitted a claim for reimbursement from the
Medi-Cal program for one year.  Prior to taking this action the
department shall use due diligence in attempting to contact the
provider at its last known telephone number and ascertain if the
return by the United States Postal Service is by mistake or shall use
due diligence in attempting to contact the provider by telephone or
in writing to ascertain whether the provider wishes to continue to
participate in the Medi-Cal program.  If deactivation pursuant to
this section occurs, the provider shall meet the requirements for
reapplication as specified in this article or the regulations adopted
thereunder.
   (b) For purposes of this section:
   (1) "Mailing address" means the address that the provider has
identified to the department in its application for enrollment as the
address at which it wishes to receive general program
correspondence.
   (2) "Pay to address" means the address that the provider has
identified to the department in its application for enrollment as the
address at which it wishes to receive warrants.
   (3) "Service or business address" means the address that the
provider has identified to the department in its application for
enrollment as the address at which the provider will provide services
to program beneficiaries.
  SEC. 23.  Section 14043.65 of the Welfare and Institutions Code is
amended to read:
   14043.65.  (a) Notwithstanding any other provision of law, any
applicant whose application for enrollment as a provider or whose
certification is denied; or any provider who is denied continued
enrollment or certification, who has been temporarily suspended, who
has had payments withheld, who has had one or more provider numbers
used to obtain reimbursement from the Medi-Cal program deactivated
pursuant to this article or Section 14107.11, or who has had a civil
penalty imposed pursuant to Section 14123.25; or any billing agent,
as defined in Section 14040, when the billing agent's registration
has been denied pursuant to subdivision (e) of Section 14040.5, may
appeal this action by submitting a written appeal, including any
supporting evidence, to the director or the director's designee.
Where the appeal is of a withholding of payment pursuant to Section
14107.11, the appeal to the director or the director's designee shall
be limited to the issue of the reliability of the evidence
supporting the withhold and shall not encompass fraud or abuse.  The
appeal procedure shall not include a formal administrative hearing
under the Administrative Procedure Act and shall not result in
reactivation of any deactivated provider numbers during appeal.  An
applicant, provider, or billing agent that files an appeal pursuant
to this section shall submit the written appeal along with all
pertinent documents and all other relevant evidence to the director
or to the director's designee within 60 days of the date of
notification of the department's action.  The director or the
director's designee shall review all of the relevant materials
submitted and shall issue a decision within 90 days of the receipt of
the appeal.  The decision may provide that the action taken should
be upheld, continued, or reversed, in whole or in part.  The decision
of the director or the director's designee shall be final.  Any
further appeal shall be required to be filed in accordance with
Section 1085 of the Code of Civil Procedure.
   (b) No applicant whose application for enrollment, as a provider,
has been denied pursuant to Section 14043.2, 14043.36, or 14043.4 may
reapply for a period of three years from the date the application is
denied.  Where the provider has appealed the denial, the three-year
period shall commence upon the date of final action by the director
or the director's designee.
  SEC. 24.  Section 14043.7 of the Welfare and Institutions Code is
amended to read:
   14043.7.  (a) The department may make unannounced visits to any
applicant or to any provider for the purpose of determining whether
enrollment, continued enrollment, or certification is warranted, or
as necessary for the administration of the Medi-Cal program.  At the
time of the visit, the applicant or provider shall be required to
demonstrate an established place of business appropriate and adequate
for the services billed or claimed to the Medi-Cal program, as
relevant to his or her scope of practice, as indicated by, but not
limited to, the following:
   (1) Being open and available to the general public.
   (2) Having regularly established and posted business hours.
   (3) Having adequate supplies in stock on the premises.
   (4) Meeting all local laws and ordinances regarding business
licensing and operations.
   (5) Having the necessary equipment and facilities to carry out
day-to-day business for his or her practice.
   (b) An unannounced visit pursuant to subdivision (a) shall be
prohibited with respect to clinics licensed under Section 1204 of the
Health and Safety Code, clinics exempt from licensure under Section
1206 of the Health and Safety Code, health facilities licensed under
Chapter 2 (commencing with Section 1250) of Division 2 of the Health
and Safety Code, and natural persons licensed or certified under
Division 2 (commencing with Section 500) of the Business and
Professions Code, the Osteopathic Initiative Act, or the Chiropractic
Initiative Act, unless the department has reason to believe that the
provider will defraud or abuse the Medi-Cal program or lacks the
organizational or administrative capacity to provide services under
the program.
   (c) Failure to remediate significant discrepancies in information
provided to the department by the provider or significant
discrepancies that are discovered as a result of an announced or
unannounced visit to a provider, for purposes of enrollment,
continued enrollment, or certification pursuant to subdivision (a)
shall make the provider subject to temporary suspension from the
Medi-Cal program, which shall include temporary deactivation of all
provider numbers used by the provider to obtain reimbursement from
the Medi-Cal program.  The director shall notify in writing the
provider of the temporary suspension and deactivation of provider
numbers, which shall take effect 15 days from the date of the
notification.  Notwithstanding Section 100171 of the Health and
Safety Code, proceedings after the imposition of sanctions in this
paragraph shall be in accordance with Section 14043.65.
  SEC. 25.  Section 14043.75 of the Welfare and Institutions Code is
amended to read:
   14043.75.  The director may, in consultation with interested
parties, by regulation, adopt, readopt, repeal, or amend additional
measures to prevent or curtail fraud and abuse.  Regulations adopted,
readopted, repealed, or amended pursuant to this section shall be
deemed emergency regulations in accordance with the Administrative
Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code).  These emergency
regulations shall be deemed necessary for the immediate preservation
of the public peace, health and safety, or general welfare.
Emergency regulations adopted, amended, or repealed pursuant to this
section shall be exempt from review by the Office of Administrative
Law.  The emergency regulations authorized by this section shall be
submitted to the Office of Administrative Law for filing with the
Secretary of State and publication in the California Code of
Regulations.
  SEC. 26.  Section 14100.75 of the Welfare and Institutions Code is
amended to read:
   14100.75.  (a) (1) Each provider and each applicant, as defined in
Section 14043.1, when applying for enrollment and continued
enrollment, shall provide, to the department, a bond, or other
security satisfactory to the department, of an amount determined by
the department, pursuant to regulations adopted by the department.
   (2) The department, in determining the amount of bond or security
required by paragraph (1), shall base the determination on the level
of estimated billings, and shall not be less than twenty-five
thousand dollars ($25,000).
   (3) This subdivision shall become operative only if the director
executes a declaration, that shall be retained by the director,
stating that the surety bonds described in this paragraph are
commercially offered throughout the state and by more than one
vendor.
   (b) (1) After three years of continuous operation as a provider, a
Medi-Cal provider may apply to the department for an exemption from
the requirements of subdivision (a).
   (2) The department shall adopt regulations establishing conditions
for the approval or denial of applications for exemption pursuant to
paragraph (1).
   (c) The department shall establish a mechanism to track rates of
participation among providers who are subject to the requirement of
subdivision (a) to determine if the requirement is a deterrent to
Medi-Cal program participation among provider applicants.
   (d) Subdivisions (a) and (b) shall not apply to natural persons
licensed or certified pursuant to Division 2 (commencing with Section
500) of the Business and Professions Code, the Osteopathic
Initiative Act, or the Chiropractic Initiative Act, or to any clinic
licensed pursuant to subdivision (a) of Section 1204 of the Health
and Safety Code, or exempt from licensure under subdivision (c) of
Section 1206 of the Health and Safety Code, to any health facility
licensed under Chapter 2 (commencing with Section 1250) of Division 2
of the Health and Safety Code, or to any provider that is operated
by a city, county, school district, county office of education, or
state special school, or any professional corporation practicing
pursuant to the Moscone-Knox Professional Corporation Act provided
for pursuant to Part 4 (commencing with Section 13400) of Division 3
of Title 1 of the Corporations Code.
   (e) Nothing in this section shall relieve an applicant or provider
of durable medical equipment or home health agency services from
complying with subdivisions (a) and (b) of Sections 14100.8 and
14100.9, as applicable.
  SEC. 27.  Section 14107 of the Welfare and Institutions Code is
amended to read:
   14107.  (a) Any person, including any applicant or provider as
defined in Section 14043.1, or billing agent, as defined in Section
14040.1, who engages in any of the activities identified in
subdivision (b) is punishable by imprisonment as set forth in
subdivisions (c) , (d), and (e), by a fine not exceeding three times
the amount of the fraud or improper reimbursement or value of the
scheme or artifice, or by both this fine and imprisonment.
   (b) The following activities are subject to subdivision (a):
   (1) A person, with intent to defraud, presents for allowance or
payment any false or fraudulent claim for furnishing services or
merchandise under this chapter or Chapter 8 (commencing with Section
14200).
   (2) A person knowingly submits false information for the purpose
of obtaining greater compensation than that to which he or she is
legally entitled for furnishing services or merchandise under this
chapter or Chapter 8 (commencing with Section 14200).
   (3) A person knowingly submits false information for the purpose
of obtaining authorization for furnishing services or merchandise
under this chapter or Chapter 8 (commencing with Section 14200).
   (4) A person knowingly and willfully executes, or attempts to
execute, a scheme or artifice to do either of the following:
   (A) Defraud the Medi-Cal program or any other health care program
administered by the department or its agents or contractors.
   (B) Obtain, by means of false or fraudulent pretenses,
representations, or promises, any of the money or property owned by,
or under the custody or control of, the Medi-Cal program or any other
health care program administered by the department or its agents or
contractors, in connection with the delivery of or payment for health
care benefits, services, goods, supplies, or merchandise.
   (c) A violation of subdivision (a) is punishable by imprisonment
in a county jail, or in the state prison for two, three, or five
years.
   (d) If the execution of a scheme or artifice to defraud as defined
in paragraph (4) of subdivision (b) is committed under circumstances
likely to cause or that do cause two or more persons great bodily
injury, as defined in Section 12022.7 of the Penal Code, or serious
bodily injury, as defined in paragraph (4) of subdivision (f) of
Section 243 of the Penal Code, a term of four years, in addition and
consecutive to the term of imprisonment imposed in subdivision (c),
shall be imposed for each person who suffers great bodily injury or
serious bodily injury.
   The additional terms provided in this subdivision shall not be
imposed unless the facts showing the circumstances that were likely
to cause or that did cause great bodily injury or serious bodily
injury to two or more persons are charged in the accusatory pleading
and admitted or found to be true by the trier of fact.
   (e) If the execution of  a scheme or artifice to defraud, as
defined in paragraph (4) of subdivision (b) results in a death which
constitutes a second degree murder, as defined in Section 189 of the
Penal Code, the offense shall be punishable, upon conviction,
pursuant to subdivision (a) of Section 190 of the Penal Code.
   (f) Any person, including an applicant or provider as defined in
Section 14043.1, or billing agent, as defined in Section 14040.1, who
has engaged in any of the activities subject to fine or imprisonment
under this section, shall be subject to the asset forfeiture
provisions for criminal profiteering.
   (g) Pursuant to Section 923 of the Penal Code, the Attorney
General may convene a grand jury to investigate and indict for any of
the activities subject to fine, imprisonment, or asset forfeiture
under this section.
   (h) The enforcement remedies provided under this section are not
exclusive and shall not preclude the use of any other criminal or
civil remedy.  However, an act or omission punishable in different
ways by this section and other provisions of law shall not be
punished under more than one provision, but the penalty to be imposed
shall be determined as set forth in Section 654 of the Penal Code.

  SEC. 28.  Section 14107.11 of the Welfare and Institutions Code is
amended to read:
   14107.11.  (a) Upon receipt of reliable evidence that would be
admissible under the administrative adjudication provisions of
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code, of fraud or willful misrepresentation
by a provider as defined in Section 14043.1, under the Medi-Cal
program or the commencement of a suspension under Section 14123, the
department may do any of the following:
   (1) Collect any Medi-Cal program overpayment identified through an
audit or examination, or any portion thereof from any provider.
Notwithstanding Section 100171 of the Health and Safety Code, a
provider may appeal the collection of overpayments under this section
pursuant to procedures established in Article 5.3 (commencing with
Section 14170).  Overpayments collected under this section shall not
be returned to the provider during the pendency of any appeal and may
be offset to satisfy audit or appeal findings if the findings are
against the provider.  Overpayments will be returned to a provider
with interest if findings are in favor of the provider.
   (2) Withhold payment for any goods, services, supplies, or
merchandise, or any portion thereof.  The department shall notify the
provider within five days of any withholding of payment under this
section.  The notice shall do all of the following:
   (A) State that payments are being withheld in accordance with this
subdivision and that the withholding is for a temporary period and
will not continue after it is determined that the evidence of fraud
or willful misrepresentation is insufficient or when legal
proceedings relating to the alleged fraud or willful
misrepresentation are complete.
   (B) Cite the circumstances under which the withholding of the
payments will be terminated.
   (C) Specify, when appropriate, the type or types of claims for
which payment is being withheld.
   (D) Inform the provider of the right to submit written evidence
that would be admissible under the administrative adjudication
provisions of Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code, for consideration by
the department.
   (3) Notwithstanding Section 100171 of the Health and Safety Code,
a provider may appeal a withholding of payment pursuant to Section
14043.65.  Payments withheld under this section shall not be returned
to the provider during the pendency of any appeal and may be offset
to satisfy audit or appeal findings.
   (b) The director may, in consultation with interested parties,
adopt regulations to implement this section as necessary.  These
regulations may be adopted as emergency regulations in accordance
with the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) Part 1 of Division 3 of Title 2 of the Government
Code) and the adoption of the regulations shall be deemed to be an
emergency and necessary for the immediate preservation of the public
peace, health and safety, or general welfare.  The director shall
transmit these emergency regulations directly to the Secretary of
State for filing and the regulations shall become effective
immediately upon filing.  Upon completion of the formal regulation
adoption process and prior to the expiration of the 120-day duration
period of emergency regulations, the director shall transmit directly
to the Secretary of State the adopted regulations, the rulemaking
file, and the certification of compliance as required by subdivision
(e) of Section 11346.1 of the Government Code.
   (c) For purposes of this section, "provider" means any individual,
partnership, group, association, corporation, institution, or
entity, and the officers, directors, employees, or agents thereof,
that provide services, goods, supplies, or merchandise, directly or
indirectly, to a Medi-Cal beneficiary, and that has been enrolled in
the Medi-Cal program.
  SEC. 29.  Section 14123.25 is added to the Welfare and Institutions
Code, to read:
   14123.25.  (a) In lieu of, or in addition to, the imposition of
any other sanction available to it, including the sanctions and
penalties authorized under Section 14123.2 or 14171.6, and as the
"single state agency" for California vested with authority to
administer the Medi-Cal program, the department shall exercise the
authority granted to it in Section 1002.2 of Title 42 of the Code of
Federal Regulations, and may also impose the mandatory and permissive
exclusions identified in Section 1128 of the federal Social Security
Act (42 U.S.C. Sec. 1320a-7), and its implementing regulations, and
impose civil penalties identified in Section 1128A of the federal
Social Security Act (42 U.S.C. Sec. 1320a-7a), and its implementing
regulations, against applicants and providers, as defined in Section
14043.1 or against billing agents, as defined in Section 14040.1.
The department may also terminate, or refuse to enter into, a
provider agreement authorized under Section 14043.2 with an applicant
or provider, as defined in Section 14043.1, upon the grounds
specified in Section 1866(b)(2) of the federal Social Security Act
(42 U.S.C. Sec. 1395cc(b)(2).  Notwithstanding Section 100171 of the
Health and Safety Code or any other provision of law, any appeal by
an applicant, provider, or billing agent of the imposition of a civil
penalty, exclusion, or other sanction pursuant to this subdivision
shall be in accordance with Section 14043.65, except that where the
action is based upon conviction for any crime involving fraud or
abuse of the Medi-Cal, medicaid, or Medicare programs, or exclusion
by the federal government from the medicaid or Medicare programs the
action shall be automatic and not subject to appeal or hearing.
   (b) In addition, the department may impose the intermediate
sanctions identified in Section 1846 of the Social Security Act (42
U.S.C. Sec.  1395w-2), and its implementing regulations, against any
provider that is a clinical laboratory, as defined in Section 1206 of
the Business and Professions Code.  The imposition and appeal of
this intermediate sanction shall be in accordance with Article 8
(commencing with Section 1065) of Chapter 2 of Division 1 of Title 17
of the California Code of Regulations.
  SEC. 30.  Section 14124.1 of the Welfare and Institutions Code is
amended to read:
   14124.1.  Each provider, as defined in Section 14043.1, of health
care services rendered under the Medi-Cal program or any other health
care program administered by the department or its agents or
contractors, shall keep and maintain records of each such service
rendered, the beneficiary or person to whom rendered, the date the
service was rendered, and such additional information as the
department may by regulation require.  Records herein required to be
kept and maintained shall be retained by the provider for a period of
three years from the date the service was rendered.
  SEC. 31.  Section 14124.2 of the Welfare and Institutions Code is
amended to read:
   14124.2.  (a) (1) During normal working hours, the department may
make any examination of the books and records of, and may visit and
inspect the premises or facilities of, those identified in paragraphs
(2) and (3), that it may deem necessary to carry out the provisions
of this chapter or Chapter 8 (commencing with Section 14200) and
regulations adopted thereunder, or the law under which the department
or its agents or contractors administer any other health care
program.
   (2) Any applicant or provider, as defined in Section 14043.1,
pertaining to services, goods, supplies, or merchandise rendered or
supplied, directly or indirectly, or to be rendered or supplied,
directly or indirectly, to any beneficiary under this chapter or
Chapter 8 (commencing with Section 14200).
   (3) Any person or entity that provides services, goods, supplies,
or merchandise, directly or indirectly, under, or seeks reimbursement
from, any other health care program administered by the department
or its agents or contractors.
   (b) (1) Applicants, providers, or others receiving or seeking
reimbursement under the Medi-Cal program or other health care
programs administered by the department or its agents or contractors
shall furnish information or copies of records and documentation upon
request by the department.  Unannounced visits to request this
information shall be reserved for those exceptional situations where
arrangement of an appointment beforehand is clearly not possible or
is clearly inappropriate to the nature of the intended visit.  Only
those related books and records of each service rendered, the
beneficiary to whom rendered, the date, and additional information as
the department may by regulation require shall be subject to the
requirement of furnishing copies.  This information may include
records to support and document the recipient's eligibility for
services and, to the extent necessary, records to provide proof of
the quantity and receipt of the services, and that the services were
provided by proper personnel.  Providers and others subject to this
section shall be reimbursed for reasonable photocopying-related
expenses as determined by the department.  Failure to comply with the
requests for information or records made pursuant to this section
shall be grounds for immediate suspension of the provider or others
subject to this section under subdivision (b) of Section 14123 or
under the other health care programs administered by the department
or its agents or contractors.
   (2) Any copies furnished pursuant to this section shall be used
only to investigate and pursue criminal, civil, or administrative
sanctions for Medi-Cal fraud or abuse, including the provision of
dental services that are below or less than the standard of
acceptable quality as prescribed by subdivision (f) of Section 14123,
or fraud or abuse under any other health care program administered
by the department or its agents or contractors and the copies shall
be destroyed when that purpose has been satisfied.  This section
shall not be construed to prohibit the referral of
                             investigative findings, including copies
of books and records, to the appropriate federal, state, or local
licensing, certifying, regulatory, or prosecutorial authority.
   (c) For purposes of this section and Section 14124.1, "provider"
shall be defined as follows:
   (1) "Provider" shall have the meaning contained in Section
14043.1.
   (2) "Provider" shall also include any person or entity under
contract with the provider, as defined in paragraph (1), to assist in
the application process or eligibility determination.
  SEC. 32.  Section 14170 of the Welfare and Institutions Code is
amended to read:
   14170.  (a) (1) Amounts paid for services provided to Medi-Cal
beneficiaries shall be audited by the department in the manner and
form prescribed by the department.  The department shall maintain
adequate controls to ensure responsibility and accountability for the
expenditure of federal and state funds.  Cost reports and other data
submitted by providers to a state agency for the purpose of
determining reasonable costs for services or establishing rates of
payment shall be considered true and correct unless audited or
reviewed by the department within 18 months after July 1, 1969, the
close of the period covered by the report, or after the date of
submission of the original or amended report by the provider,
whichever is later.  Moreover the cost reports and other data for
cost reporting periods beginning on January 1, 1972, and thereafter
shall be considered true and correct unless audited or reviewed
within three years after the close of the period covered by the
report, or after the date of submission of the original or amended
report by the provider, whichever is later.
   (2) (A) Nothing in this section shall be construed to limit the
correction of cost reports or rates of payment when inaccuracies are
determined to be the result of intent to defraud, or when a delay in
the completion of an audit is the result of willful acts by the
provider or inability to reach agreement on the terms of final
settlement.
   (B) Nothing in this section shall be construed to preclude the
department from further review of cost reports and other data for
cost reporting periods beginning on January 1, 1998, after the
three-year period contained in paragraph (1) of subdivision (a),
where after the three-year period the department discovers
information not customarily contained in these cost reports and other
data for the fiscal periods in question that indicates the provider
may have engaged in practices that have resulted in
overreimbursement.
   (3) Notwithstanding any other provision of law, nursing facilities
and all categories of intermediate care facilities for the
developmentally disabled which have received and are receiving funds
for salary increases pursuant to Sections 14110.6 and 14110.7 shall
maintain payroll and personnel records for examination by auditors
from the department and the Labor Commissioner beginning March 1985
until the records have been audited, or until December 31, 1992,
whichever occurs first.
   (b) Notwithstanding any other provision of law, costs reported for
reimbursement purposes relative to Medi-Cal beneficiaries in nursing
facilities that are distinct parts of acute care hospitals shall be
audited by the department at least annually.  The audits may be
performed on a sample basis and, when the sample is statistically
reliable, as determined by the department, may be used for
ratesetting purposes.
  SEC. 33.  Section 14170.8 of the Welfare and Institutions Code is
amended to read:
   14170.8.  (a) Notwithstanding any other provision of law, every
primary supplier of pharmaceuticals, medical equipment, or supplies
shall maintain accounting records to demonstrate the manufacture,
assembly, purchase, or acquisition and subsequent sale, of any
pharmaceuticals, or medical equipment, or supplies to providers, as
defined in Section 14043.1.  Accounting records shall include, but
not be limited to, inventory records, general ledgers, financial
statements, purchase and sales journals and invoices, prescription
records, bills of lading, and delivery records.  For purposes of this
section the term "primary suppliers" shall mean any manufacturer,
principal labeler, assembler, wholesaler, or retailer.
   (b) Accounting records maintained pursuant to subdivision (a)
shall be subject to audit or examination by the department or its
agents.  This audit or examination may include, but is not limited
to, verification of what was claimed by the provider.  These
accounting records shall be maintained for three years from the date
of sale or the date of service.
   (c) This section shall not apply to any clinic licensed pursuant
to subdivision (a) of Section 1204 of the Health and Safety Code or
to any manufacturer of prescription drugs registered with the federal
Food and Drug Administration in accordance with Section 510 of the
Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 360).
  SEC. 34.  Section 14171.6 of the Welfare and Institutions Code is
amended to read:
   14171.6.  (a) (1) Any provider, as defined in paragraph (3), that
obtains reimbursement under this chapter to which it is not entitled
shall be subject to interest charges or penalties as specified in
this section.
   (2) When it is established upon audit that the provider has not
received reimbursement to which the provider is entitled, the
department shall pay the provider interest assessed at the rate, and
in the manner, specified in subdivision (g) of Section 14171.
   (3) For purposes of this section, "provider" means any provider,
as defined in Section 14043.1.
   (b) When it is established upon audit that the provider has
claimed payments under this chapter to which it is not entitled, the
provider shall pay, in addition to the amount improperly received,
interest at the rate specified by subdivision (h) of Section 14171.
   (c) (1) When it is established upon audit that the provider
claimed payments related to services or costs that the department had
previously notified the provider in an audit report that the costs
or services were not reimbursable, the provider shall pay, in
addition to the amount improperly claimed, a penalty of 10 percent of
the amount improperly claimed after receipt of the notice, plus the
cost of the audit.
   (2) In addition to the penalty and costs specified by paragraph
(1), interest shall be assessed at the rate specified in subdivision
(h) of Section 14171.
   (3) Providers that wish to preserve appeal rights or to challenge
the department's positions regarding appeal issues may claim the
costs or services and not be reimbursed therefor if they are
identified and presented separately on the cost report.
   (d) (1) When it is established that the provider fraudulently
claimed and received payments under this chapter, the provider shall
pay, in addition to that portion of the claim that was improperly
claimed, a penalty of 300 percent of the amount improperly claimed,
plus the cost of the audit.
   (2) In addition to the penalty and costs specified by paragraph
(1), interest shall be assessed at the rate specified by subdivision
(h) of Section 14171.
   (3) For purposes of this subdivision, a fraudulent claim is a
claim upon which the provider has been convicted of fraud upon the
Medi-Cal program.
   (e) Nothing in this section shall prevent the imposition of any
other civil or criminal penalties to which the provider may be
liable.
   (f) Any appeal to any action taken pursuant to subdivision (b),
(c), or (d) is subject to the administrative appeals process provided
by Section 14171.
   (g) As used in this section, "cost of the audit" includes actual
hourly wages, travel, and incidental expenses at rates allowable by
rules adopted by the State Board of Control and applicable overhead
costs that are incurred by employees of the state in administering
this chapter with respect to the performance of audits.
   (h) This section shall not apply to any clinic licensed pursuant
to subdivision (a) of Section 1204 of the Health and Safety Code,
clinics exempt from licensure under Section 1206 of the Health and
Safety Code, health facilities licensed under Chapter 2 (commencing
with Section 1250) of Division 2 of the Health and Safety Code, or to
any provider that is operated by a city, county, or school district.

  SEC. 35.  Section 24005 of the Welfare and Institutions Code is
amended to read:
   24005.  (a) This section shall apply to the Family Planning Access
Care and Treatment Waiver program identified in subdivision (aa) of
Section 14132 and this program.
   (b) Only licensed medical personnel with family planning skills,
knowledge, and competency may provide the full range of family
planning medical services covered in this program.
   (c) Medi-Cal enrolled providers, as determined by the department,
shall be eligible to provide family planning services under the
program when these services are within their scope of practice and
licensure.  Those clinical providers electing to participate in the
program and approved by the department shall provide the full scope
of family planning education, counseling, and medical services
specified for the program, either directly or by referral, consistent
with standards of care issued by the department.
   (d) The department shall require providers to enter into clinical
agreements with the department to ensure compliance with standards
and requirements to maintain the fiscal integrity of the program.
Provider applicants, providers, and persons with an ownership or
control interest, as defined in federal medicaid regulations, shall
be required to submit to the department their social security numbers
to the full extent allowed under federal law.  All state and federal
statutes and regulations pertaining to the audit or examination of
Medi-Cal providers shall apply to this program.
   (e) Clinical provider agreements shall be signed by the provider
under penalty of perjury.  The department may screen applicants at
the initial application and at any reapplication pursuant to
requirements developed by the department to determine provider
suitability for the program.
   (f) The department may complete a background check on clinical
provider applicants for the purpose of verifying the accuracy of
information provided to the department for purposes of enrolling in
the program and in order to prevent fraud and abuse.  The background
check may include, but not be limited to, unannounced onsite
inspection prior to enrollment, review of business records, and data
searches.  If discrepancies are found to exist during the
preenrollment period, the department may conduct additional
inspections prior to enrollment.  Failure to remediate significant
discrepancies as prescribed by the director may result in denial of
the application for enrollment.  Providers that do not provide
services consistent with the standards of care or that do not comply
with the department's rules related to the fiscal integrity of the
program may be disenrolled as a provider from the program at the sole
discretion of the department.
   (g) The department shall not enroll any applicant who, within the
previous 10 years:
   (1) Has been convicted of any felony or misdemeanor that involves
fraud or abuse in any government program, that relates to neglect or
abuse of a patient in connection with the delivery of a health care
item or service, or that is in connection with the interference with,
or obstruction of, any investigation into health care related fraud
or abuse.
   (2) Has been found liable for fraud or abuse in any civil
proceeding, or that has entered into a settlement in lieu of
conviction for fraud or abuse in any government program.
   (h) In addition, the department may deny enrollment to any
applicant that, at the time of application, is under investigation by
the department or any local, state, or federal government law
enforcement agency for fraud or abuse.  The department shall not deny
enrollment to an otherwise qualified applicant whose felony or
misdemeanor charges did not result in a conviction solely on the
basis of the prior charges.  If it is discovered that a provider is
under investigation by the department or any local, state, or federal
government law enforcement agency for fraud or abuse, that provider
shall be subject to immediate disenrollment from the program.
   (i) (1) The program shall disenroll as a program provider any
individual who, or any entity that, has a license, certificate, or
other approval to provide health care, which is revoked or suspended
by a federal, California, or other state's licensing, certification,
or other approval authority, has otherwise lost that license,
certificate, or approval, or has surrendered that license,
certificate, or approval while a disciplinary hearing on the license,
certificate, or approval was pending.  The disenrollment shall be
effective on the date the license, certificate, or approval is
revoked, lost, or surrendered.
   (2) A provider shall be subject to disenrollment if claims for
payment are submitted under any provider number used by the provider
to obtain reimbursement from the program for the services, goods,
supplies, or merchandise provided, directly or indirectly, to a
program beneficiary, by an individual or entity that has been
previously suspended, excluded, or otherwise made ineligible to
receive, directly or indirectly, reimbursement from the program or
from the Medi-Cal program and the individual has previously been
listed on either the Suspended and Ineligible Provider List, which is
published by the department, to identify suspended and otherwise
ineligible providers or any list published by the federal Office of
the Inspector General regarding the suspension or exclusion of
individuals or entities from the federal Medicare and medicaid
programs, to identify suspended, excluded, or otherwise ineligible
providers.
   (3) The department shall deactivate, immediately and without prior
notice, the provider numbers used by a provider to obtain
reimbursement from the program when warrants or documents mailed to a
provider's mailing address, its pay to address, or its service
address, if any, are returned by the United States Postal Service as
not deliverable or when a provider has not submitted a claim for
reimbursement from the program for one year.  Prior to taking this
action, the department shall use due diligence in attempting to
contact the provider at its last known telephone number and to
ascertain if the return by the United States Postal Service is by
mistake and shall use due diligence in attempting to contact the
provider by telephone or in writing to ascertain whether the provider
wishes to continue to participate in the Medi-Cal program.  If
deactivation pursuant to this section occurs, the provider shall meet
the requirements for reapplication as specified in regulation.
   (4) For purposes of this subdivision:
   (A) "Mailing address" means the address that the provider has
identified to the department in its application for enrollment as the
address at which it wishes to receive general program
correspondence.
   (B) "Pay to address" means the address that the provider has
identified to the department in its application for enrollment as the
address at which it wishes to receive warrants.
   (C) "Service address" means the address that the provider has
identified to the department in its application for enrollment as the
address at which the provider will provide services to program
beneficiaries.
   (j) Subject to Article 4 (commencing with Section 19130) of
Chapter 5 of Division 5 of Title 2 of the Government Code, the
department may enter into contracts to secure consultant services or
information technology including, but not limited to, software, data,
or analytical techniques or methodologies for the purpose of fraud
or abuse detection and prevention.  Contracts under this section
shall be exempt from the Public Contract Code.
   (k) Enrolled providers shall attend specific orientation approved
by the department in comprehensive family planning services.
Enrolled providers who insert IUDs or contraceptive implants shall
have received prior clinical training specific to these procedures.
   (l) Upon receipt of reliable evidence that would be admissible
under the administrative adjudication provisions of Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code, of fraud or willful misrepresentation by a
provider under the program or commencement of a suspension under
Section 14123, the department may do any of the following:
   (1) Collect any State-Only Family Planning program or Family
Planning Access Care and Treatment Waiver program overpayment
identified through an audit or examination, or any portion thereof
from any provider.  Notwithstanding Section 100171 of the Health and
Safety Code, a provider may appeal the collection of overpayments
under this section pursuant to procedures established in Article 5.3
(commencing with Section 14170) of Part 3 of Division 9.
Overpayments collected under this section shall not be returned to
the provider during the pendency of any appeal and may be offset to
satisfy audit or appeal findings, if the findings are against the
provider.  Overpayments shall be returned to a provider with interest
if findings are in favor of the provider.
   (2) Withhold payment for any goods or services, or any portion
thereof, from any State-Only Family Planning program or Family
Planning Access Care and Treatment Waiver program provider.  The
department shall notify the provider within five days of any
withholding of payment under this section.  The notice shall do all
of the following:
   (A) State that payments are being withheld in accordance with this
paragraph and that the withholding is for a temporary period and
will not continue after it is determined that the evidence of fraud
or willful misrepresentation is insufficient or when legal
proceedings relating to the alleged fraud or willful
misrepresentation are completed.
   (B) Cite the circumstances under which the withholding of the
payments will be terminated.
   (C) Specify, when appropriate, the type or types of claimed
payments being withheld.
   (D) Inform the provider of the right to submit written evidence
that is evidence that would be admissible under the administrative
adjudication provisions of Chapter 5 (commencing with Section 11500)
of Part 1 of Division 3 of Title 2 of the Government Code, for
consideration by the department.
   (3) Notwithstanding Section 100171 of the Health and Safety Code,
a provider may appeal a withholding of payment under this section
pursuant to Section 14043.65.  Payments withheld under this section
shall not be returned to the provider during the pendency of any
appeal and may be offset to satisfy audit or appeal findings.
   (m) As used in this section:
   (1) "Abuse" means either of the following:
   (A) Practices that are inconsistent with sound fiscal or business
practices and result in unnecessary cost to the medicaid program, the
Medicare program, the Medi-Cal program, including the Family
Planning Access Care and Treatment Waiver program, identified in
subdivision (aa) of Section 14132, another state's medicaid program,
or the State-Only Family Planning program, or other health care
programs operated, or financed in whole or in part, by the federal
government or any state or local agency in this state or any other
state.
   (B) Practices that are inconsistent with sound medical practices
and result in reimbursement, by any of the programs referred to in
subparagraph (A) or other health care programs operated, or financed
in whole or in part, by the federal government or any state or local
agency in this state or any other state, for services that are
unnecessary or for substandard items or services that fail to meet
professionally recognized standards for health care.
   (2) "Fraud" means an intentional deception or misrepresentation
made by a person with the knowledge that the deception could result
in some unauthorized benefit to himself or herself or some other
person.  It includes any act that constitutes fraud under applicable
federal or state law.
   (3) "Provider" means any individual, partnership, group,
association, corporation, institution, or entity, and the officers,
directors, owners, managing employees, or agents of any partnership,
group, association, corporation, institution, or entity, that
provides services, goods, supplies, or merchandise, directly or
indirectly, to a beneficiary and that has been enrolled in the
program.
   (4) "Convicted" means any of the following:
   (A) A judgment of conviction has been entered against an
individual or entity by a federal, state, or local court, regardless
of whether there is a post-trial motion or an appeal pending or the
judgment of conviction or other record relating to the criminal
conduct has been expunged or otherwise removed.
   (B) A federal, state, or local court has made a finding of guilt
against an individual or entity.
   (C) A federal, state, or local court has accepted a plea of guilty
or nolo contendere by an individual or entity.
   (D) An individual or entity has entered into participation in a
first offender, deferred adjudication, or other program or
arrangement where judgment of conviction has been withheld.
   (5) "Professionally recognized standards of health care" means
statewide or national standards of care, whether in writing or not,
that professional peers of the individual or entity whose provision
of care is an issue, recognize as applying to those peers practicing
or providing care within a state.  When the United States Department
of Health and Human Services has declared a treatment modality not to
be safe and effective, practitioners that employ that treatment
modality shall be deemed not to meet professionally recognized
standards of health care.  This definition shall not be construed to
mean that all other treatments meet professionally recognized
standards of care.
   (6) "Unnecessary or substandard items or services" means those
that are either of the following:
   (A) Substantially in excess of the provider's usual charges or
costs for the items or services.
   (B) Furnished, or caused to be furnished, to patients, whether or
not covered by Medicare, medicaid, or any of the state health care
programs to which the definitions of applicant and provider apply,
and which are substantially in excess of the patient's needs, or of a
quality that fails to meet professionally recognized standards of
health care.  The department's determination that the items or
services furnished were excessive or of unacceptable quality shall be
made on the basis of information, including sanction reports, from
the following sources:
   (i) The professional review organization for the area served by
the individual or entity.
   (ii) State or local licensing or certification authorities.
   (iii) Fiscal agents or contractors, or private insurance
companies.
   (iv) State or local professional societies.
   (v) Any other sources deemed appropriate by the department.
   (7) "Enrolled or enrollment in the program" means authorized under
any and all processes by the department or its agents or contractors
to receive, directly or indirectly, reimbursement for the provision
of services, goods, supplies, or merchandise to a program
beneficiary.
   (n) In lieu of, or in addition to, the imposition of any other
sanctions available, including the imposition of a civil penalty
under Sections 14123.2 or 14171.6, the program may impose on
providers any or all of the penalties pursuant to Section 14123.25,
in accordance with the provisions of that section.  In addition,
program providers shall be subject to the penalties contained in
Section 14107.
   (o) (1) Notwithstanding any other provision of law, every primary
supplier of pharmaceuticals, medical equipment, or supplies shall
maintain accounting records to demonstrate the manufacture, assembly,
purchase, or acquisition and subsequent sale, of any
pharmaceuticals, medical equipment, or supplies, to providers.
Accounting records shall include, but not be limited to, inventory
records, general ledgers, financial statements, purchase and sales
journals, and invoices, prescription records, bills of lading, and
delivery records.
   (2) For purposes of this subdivision, the term "primary supplier"
means any manufacturer, principal labeler, assembler, wholesaler, or
retailer.
   (3) Accounting records maintained pursuant to paragraph (1) shall
be subject to audit or examination by the department or its agents.
The audit or examination may include, but is not limited to,
verification of what was claimed by the provider.  These accounting
records shall be maintained for three years from the date of sale or
the date of service.
   (p) Each provider of health care services rendered to any program
beneficiary shall keep and maintain records of each service rendered,
the beneficiary to whom rendered, the date, and such additional
information as the department may by regulation require.  Records
required to be kept and maintained pursuant to this subdivision shall
be retained by the provider for a period of three years from the
date the service was rendered.
   (q) A program provider applicant or a program provider shall
furnish information or copies of records and documentation requested
by the department.  Failure to comply with the department's request
shall be grounds for denial of the application or automatic
disenrollment of the provider.
   (r) A program provider may assign signature authority for
transmission of claims to a billing agent subject to Sections 14040,
14040.1, and 14040.5.
   (s) Moneys payable or rights existing under this division shall be
subject to any claim, lien, or offset of the State of California,
and any claim of the United States of America made pursuant to
federal statute, but shall not otherwise be subject to enforcement of
a money judgment or other legal process, and no transfer or
assignment, at law or in equity, of any right of a provider of health
care to any payment shall be enforceable against the state, a fiscal
intermediary, or carrier.
  SEC. 36.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition
     of a crime within the meaning of Section 6 of Article XIIIB of
the California Constitution.
